Company that bought operations from Verizon in New England faces stiff fines for failure to expand broadband as promised

In an unprecedented meeting last week, regulators from three New England states held a joint session at which they expressed their frustration with FairPoint Communications. FairPoint, which bought Verizon's wire line operations in New England, has failed to meet a number of commitments made to the regulators including specific targets for expanding broadband access.

While Verizon walked away with billions from the 2008 sale, regulators required specific conditions before they approved it. However, FairPoint has been unsuccessful in simultaneously paying off its added debt, smoothly transferring customers and computer systems from Verizon, and expanding broadband. Bankruptcy is looming as a likely possibility.

Regulators in the 14 states where Verizon now proposes to sell its landlines to Frontier face an almost identical situation as New England regulators did last year. Frontier Communications is proposing to buy Verizon's entire wire line operation in West Virginia – as well as Verizon's scattered landlines across 13 other states – in a similarly structured deal.

There are many similarities between the FairPoint and Frontier deals. In both cases, Verizon chose a much smaller company in order to take advantage of an obscure tax loophole. With the Frontier sale, Verizon will avoid paying any taxes on the $3.3 billion it will receive from Frontier. Frontier will have to cope with three times more employees, three times more access lines and a 75 percent increase in its debt from $4.5 to $8 billion.

Verizon has a very poor track record in these sales. Verizon sold its Hawaii operations to Hawaiian Telcom in 2005 and it filed for bankruptcy. Customers, service and employees have suffered as a result.

Frontier – just like FairPoint – is a making promises that it may not be able to meet. Like FairPoint, state regulators are being asked to approve a deal where a small company will attempt to simultaneously run a much larger operation, pay off billions of dollars more in debt, integrate Verizon's computer systems and spend more money to expand broadband.

In the end Verizon will profit but consumers, workers and communities are put at real risk.

In New Hampshire, FairPoint had promised to expand broadband reach from 62 percent to 75 percent within 18 months of the sale and 85 percent within two years. It has failed to meet these targets. Vermont Public Service Board Chairman James Volz said, "We have seen neither sufficient progress nor a firm commitment that will achieve an acceptable level of service."

At the hearing, FairPoint executives refused to even offer a date when they will deliver on their broadband expansion promises. FairPoint could be fined $500,000 for every percentage point it falls short.

Expanding broadband access is an especially critical factor for all rural areas. But Frontier has failed to make any specific commitments, set any timeline or offer a plan for its broadband buildout.

Union leaders believe that states shouldn't risk their telecommunications' future just so Verizon can fatten its bottom line. Regulators shouldn't approve this sale because the risks are too great. Instead, our legislators, regulators and the Governor should require Verizon to meet its service responsibilities. Verizon shouldn't be allowed to walk away with $3.3 billion tax free, and leave the fate of its customers in the hands of a company with a lot less resources. If Frontier should falter, customers and the public would be required to pick up the pieces – not Verizon!

More information about the campaign to stop the Verizon sale to Frontier is on www.verizonfrontiersale.org